Traditionally, the vast majority of merchant transactions were limited to brick and mortar retail establishments. With the advent of the Internet and electronic commerce, merchant services have grown to encompass a wide variety of online and remote functionality. The new functionality provided by Internet-enabled computing devices has led to innumerable benefits as well as risks for all parties involved.
Mobile devices have skewed the traditional merchant-consumer relationship even further by allowing almost anyone to act as a merchant. Mobile devices such as smartphones and tablet computers provide location-based services and real-time connectivity. Users of an online auction website may buy, sell, and accept various forms of payment with minimal effort. At the same time, users may comparison shop, purchase a sale item on a favorite website, or search for a nearby merchant without being tethered to a Wifi connection or a particular location.
As a result, modern financial institutions face a host of unprecedented security risks. For example, identity theft and online financial fraud lead to substantial losses for consumers, merchants, and financial institutions alike. The relative anonymity provided by the Internet is naturally conducive to financial fraud. Malware such as viruses, trojans, and worms, coupled with traditional instruments of financial fraud, have become a pervasive threat to personal privacy and security. In addition to the obvious financial losses associated with such threats, a single security lapse involving the loss of consumer data can be enough to permanently impact the reputation and goodwill of a merchant or financial institution.